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What will the BoE need to do now about the GBP?
The latest mini-budget from the UK sent gilt markets into a sharp fall and the GBP had its own mini crash. Why should fiscal stimulus be seen as so negative for the UK? The bottom line was that investors feared that the huge stimulus package would only end up fuelling inflation and actually making the eventual pullback in the UK economy worse. Rising debt levels to fuel an economy struggling with inflation was ultimately seen as a very poor fiscal decision. The expectations are that the Bank of England will now need to hike interest rates more aggressively. STIR market pricing shows a terminal rate just shy of 6%. ... (full story)